Multi-Asset Perspective – March 2023


Our investment director and head of Multi-Asset, Kelly Chung, shares her latest insights on different asset classes. Asia equities corrected amid renewed concerns over stronger macro headwinds as US interest rates have become more hawkish, and the biggest inversion of the US yield curve since the 1980s has flagged heightened risks of a recession.

In China, investors focused on messages around the “Two Sessions” meetings. Although the GDP growth target is downplayed and at the low end of expectations, implying that the likelihood of aggressive stimulus measures is diminished, the commitment to reforms and industrial upgrades and support for the private economy reflects a pro-business governing style.

China / Hong Kong Equities
  • The market is adjusting its US interest rate expectations to reflect more rate hikes ahead, as the Fed has sounded hawkish in recent speeches due to service inflation remaining sticky. The rise in US Treasury yields also caused the market to be cautious, with the growth sector correcting as a result.
  • The rising US-China tensions, as seen with the US’ plan of banning TikTok and talks of limiting investment in China, also caused sentiment to turn negative. Also, with China’s announcement at the National People’s Congress (NPC) of its new government restructuring plan, foreign investors are taking a cautious approach toward China for now.
  • On the other hand, macro data in China and Hong Kong have picked up since February with the reopening of the economy. Inflation is also under control in China since the reopening.
China A-Shares
  • Investors focused on messages around the “Two Sessions”, and China’s GDP growth target of “around 5%” has diminished some hope for an aggressive stimulus. In addition, the weakening renminbi due to the US dollar’s strength has also caused some negative impact on sentiment.
  • However, as compared to offshore China, China A-shares will likely show more resilience, as foreign investors’ selling pressure is much less, given foreign capital didn’t participate much in the China A-share market in previous months. Also, onshore investors are less pessimistic about the restructuring announcements from the NPC compared to foreign investors.
Asia ex-Japan Equities
  • Views on US interest rates have shifted significantly, with investors bracing for the possibility of more interest rate hikes with a higher terminal rate from previous expectations of rates to peak soon.
  • The strengthening of the US dollar has caused some selling pressure from Asia ex-Japan equities. Company earnings so far are in line without many positive surprises. The movement in US Treasury yields has dominated the market sentiment.
Emerging Market ex-Asia Equities
  • The re-strengthening of the US dollar and Treasury yields are the biggest negatives to emerging market equities. Investors are drawing money out from emerging markets and reallocating back to the US.
Japanese Equities
  • Japan’s lower house approved the nomination of Kazuo Ueda as the next Bank of Japan (BOJ) chief. He reaffirmed the yield curve control policy earlier until long-term inflation achieves the 2% target. With the US dollar strengthened, the Japanese yen started to weaken again, with carry trades starting to come back.
  • The weaker yen has benefited Japanese equities. However, the risk of further widening of the band of the yield curve control still exists, given the pressure of BOJ in the massive bond purchase.
Asia Investment Grade Bonds
  • The rapid rise in US yields has caused investors to be cautious about duration. The more than 100 bps yield curve inversion has flagged heightened risks of a recession1. Together with the rising HIBOR and CDS in China, investors are taking a cautious approach toward credit in the near term.
Asia High Yield Bonds
  • After some aggressive tightening of credit spreads in Asia high yield bonds, especially the China high yield space, investors have adopted a wait-and-see stance. With some restructuring in some defaulted Chinese property names, sentiment remains positive in Chinese property.
  • However, the rising US yields and CDS in China have caused investors to be more cautious about credit.
Emerging Market Debt
  • There is a stronger macro headwind to emerging markets as expectations on US interest rates have become more hawkish. The biggest inversion of the US yield curve since 1981 has also caused investors to worry about the global macro picture, particularly its impact on emerging markets.
  • Gold recently strongly correlates with US interest rate expectations and the US dollar. With short-term interest rates breaking above 5%, the attractiveness of Gold has diminished.
  • However, Gold remains a good hedge against heightened geopolitical risks and stagflation concerns.
  • Multi-asset offers lower volatility compared to traditional single-asset or balanced portfolios. However, the correlation between risk assets, such as equities, credits, and commodities, has recently increased dramatically. In an uncertain environment with low yields, income becomes an essential source of return for investors.


  1. Bloomberg, 15 Mar 2023
February 2023 performance YTD performance
MSCI AC Asia ex-Japan Index (in USD)-6.82%0.83%
MSCI China Index (in USD)-10.37%0.18%
CSI 300 Index (in CNY)-2.08%5.14%
Hang Seng Index (in HKD)-9.41%0.03%
Taiwan Stock Exchange Index (in TWD)1.56%9.66%
MSCI Taiwan Index (USD)-1.13%11.40%
JPM ACI China Total Return Index (in USD)-1.18%1.79%
JPM Asia Credit Total Return Index (in USD)-1.33%1.61%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 28 February 2023

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